Hi, I am planning to buy a flat in Bangalore. This property is ready to move but Occupancy Certificate is not received. Builder is asking for Vat And service tax at 10 % of basic cost (sqft rate into super built up area + car parking). Is the Vat and service tax applicable in this case? Also should I wait for RERA to get enforced in this case since the builder is quoting price for super built up area rather than carpet area?
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Don't purchase the flat now wait for issue of OC
2) VAT is applicable only in respect of under construction flats
3) builder cannnot sell car parking slots
4) under RERA builder can sell flat only on carpet area basis
5) wait for builder to register before RERA
Thanks for the answers. One follow up question I have: Do the points 3 & 4 you mentioned apply/will apply in Karnataka for even ready to move in properties? I want a bit more clarification for the law as it stands today since I hear that Karnataka is yet to opt-in for the RERA. Thanks.
The RERA Bill, passed by Parliament in March 2016, included all projects that do not have a completion certificate or, an occupancy certificate.
2) from newspapers reports it appears that Karnataka government is yet to notify RERA rules
3) there is strong pressure to exclude ongoing projects from RERA in Karnataka
If you are buying a ready to occupy flat; in case the builder has developed the project to 100% & obtained the occupancy certificate for the same before selling it to you – it’s a product being sold. There is no service component involved in this and hence you don’t have to pay any service charges.VAT is not applicable for immovable goods. In summary, if you are buying a flat that is already developed by a builder, there is no Service Tax or VAT involved.
Ancillary services provided by the builder, even if the property is ready to move in, will attract service tax – but only on the service charge, not on property value. Ex. service tax will be payable on property maintenance charges.
An under-construction flat attracts both, Service Tax & Value Added Tax.
If you booked a Flat which is under Construction then the Obtaining Occupancy Certificate and Completion certificate can be mandatory under respective State laws. As per these state laws, one cannot legally move into a building unless the developer gets an occupancy certificate from the respective local administrative or civic bodies. The corporation or municipality can ask the apartment owners to leave such illegally occupied flats or impose heavy penalties in the name of ‘regularization’ though it is bot mandatory to have OC for registering the property
One follow up question I have:
Do the points 3 & 4 you mentioned apply/will apply in Karnataka for even ready to move in properties? I want a bit more clarification for the law as it stands today since I hear that Karnataka is yet to opt-in for the RERA.
The provisions for service tax and VAT remains unchanged even after implementation of RERA.
GST is not applicable to ready-to-move-in properties. As a result, developers will either have to bear the tax burden since it cannot be passed on to end consumers or prices of apartments, which are ready for possession, will increase in step with the taxes. Again, it will lead to a change in the quoted price by the developer, but the overall cost to the end customer will stay largely unchanged.